JOHANNESBURG – Rating agencies, prominent among which is Fitch, Moody’s and S&P Global Ratings, have, like the European Securities and Markets Authorities, elaborate transparency systems through which they attract the trust of those who participate in their system.
Among these are upfront agreements on what the reporting will consist of, calendar, frequencies, deadlines, governance and methodologies used in the reporting.
The public discourse in South Africa regarding rating agencies reached its zenith when the then-minister of finance, Nhlanhla Nene, was fired and had a 96-hour replacement over the weekend in the name of Minister Des van Rooyen.
Treasury director-general at the time Lungisa Fuzile clarified the matter to society that South Africa chose to be subjected to evaluation by rating agencies and as and when it found this unnecessary it was equally free not to. That silenced the irrational noise around rating agencies and the notion of picking up of the rand when it falls.
Although they serve a similar system of developing trust among citizens, sovereigns legislate on the establishment of measurement institutions.
These provide the state science – statistics. These institutions, besides the laws enacted by countries, are governed by the UN fundamental principles of official statistics, which became the supreme global law in 2017 when they were adopted by the General Assembly.
There are 10 of these, and in many ways they have technical similarities with those of rating agencies inter alia, frequency of reporting and how the reporting is undertaken.
I elaborate on reporting requirements. It is the entitlement of the citizens to receive the numbers or assessments simultaneously, so that the government and politics do not have the privilege of access to the detriment of society and economy.
In my tenure as statistician-general (SG) for more than 17 years, the principle of simultaneity of access was never tempered with.
That does not mean that there were no attempted break-ins and at times forcefully demanded by some politicians.
They tried I had to show them the provisions of the principles and remind them of the law that they passed as legislators.
I distinctly recall that in August 2016 when no less than two politicians called at night having learnt that I was going to release a report on Local Government Statistics the next day.
That being the eve of a local government election it had sent them into a tailspin.
I had to explain to them why I refused to accede to what was now developing into an instruction. I said over my dead body would I not release that report as scheduled for 10am the next day.
Should they wish to know more about the report they could access it then. I offered to take the time to explain it to them after I had publicly released it as is the entitlement of every citizen.
I have also changed release dates and followed release protocols. These changes occurred for reasons that I had not satisfied myself with the quality of the content of the reports.
Under those circumstances I would make a public statement well ahead of such a delay including the reasons.
The other reason for changing schedule would have pertained to optimising reach of the report to the audience. This always causes and continues to cause me a moral dilemma even though it is justified when one interpretes the principles broadly.
Given how sensitive the public numbers are in moving especially financial markets, I found Moody’s failure to release South Africa’s rating quite preposterous. That they did not even provide a reason is a profound violation of protocol and peer practice which they cannot be left not to account for.
I was particularly dismayed by the public commentary that South Africa was lucky that it missed the Damascus Sword of junk by what I consider an unprofessional conduct of Moody’s.
Some media houses were even saying it is difficult for Moody’s to make an assessment given the scale of problems at Eskom.
In the book of auditors, that is called a disclaimer.
As South Africa we need to wake up to confront our reality.
Celebrating that the percentage of matriculants who passed is 75 percent when we know the pass rate represents nothing but a fundamental basis for mediocrity will not deliver the New Dawn. When Moody’s undermines the fundamental covenant of practice it has with us by not releasing a report that we are entitled to we are back at it again.
On another day the tide may turn. Driven by reasons only known to them like currently, they may not report on our sovereign debt. Are we going to cry foul? Always remember what Proverbs 3:28 says – “Do not withhold good from those to whom it is due or deserve it, when it is in your power to act. Do not tell your neighbour come back tomorrow – I will provide when you have the means.”
The EU regulations say that “Moody’s provides dates for the potential release of both solicited and unsolicited sovereign credit rating actions, but can alter these dates at its discretion”.
Let us be warned: any system without limitations on discretion is not transparent and will fail on moral grounds.
Therefore, at the minimum reasons for date change must be mandatorily reported. As a sovereign we need to know our true state and we should not accept Moody’s moods or silence.
Moody’s owes us that right and courtesy – failing which we should take them to their governance Ombuds to enforce limitations on this discretion.
Silence and obscurity is a perfect formula for capture. Our state capture is a result of obscurity, obfuscation and silence. We should not tolerate these elements.
Dr Pali Lehohla served on the UN Group working on the Fundamental Principles of Official Statistics. He is the former Statistician-General of South Africa and former head of Statistics South Africa. The views expressed here are his own.